When did you first hear the term bitcoin? The virtual currency is now over ten years old so the chances are you’ve probably heard lots of people talking about how it’s going to change the world.
Since it was first invented in 2007 it has transformed the financial world. But what is bitcoin and what can you do with bitcoins?
Here are some bitcoin facts and how it’s changed society.
Bitcoin has a higher value than most currencies, even the Great British Pound (GBP), one of the strongest currencies in the world. As of December 2019, 1 bitcoin is worth about US$7,165 or £5,386. This means that it can be expensive to hold even one bitcoin.
However, there are many advantages to holding a currency that is so strong in terms of its value. It is never likely to reach parity with the dollar or other currencies and its actual ‘real’ value, in terms of its spending power is very high.
One of the things that are unique about bitcoin is that it is possible to hold less than one bitcoin. It is not divisible into smaller currencies, as dollars and euros are into cents or pounds are into pence. This means you can purchase very small amounts.
Although its value always remains very high it is a volatile currency. In 2017 the currency reached highs of 1 bitcoin worth around $20,000. One of the advantages of this is that there are a lot of opportunities to make money from currency trading.
But the downsizes to the volatility is that whether you make money from bitcoin trading depends largely on luck rather than skill. There is no way of knowing whether it will drop dramatically or increase its value and even experts find it hard to predict.
As it is not as regulated as other currencies – because it is outside the jurisdiction of all countries – there are frequent concerns about insider trading.
This means it is possible to lose substantial amounts of money if you invest heavily in bitcoin. Bitcoin is just one cryptocurrency, however. There are thousands of cryptocurrencies that operate on the same principle and there are many that are a lot more stable than bitcoin.
Bitcoin has therefore developed a reputation as a cryptocurrency for those with spare money to ‘gamble’. Many bitcoin traders would argue its extreme volatility is what makes its fun. This is what you can do with bitcoins.
One of the key benefits of bitcoin is the fact it is a global currency. It can be used across the world and it is not backed by any bank. This is the short answer to is bitcoin backed by anything?
To its proponents, this is a major advantage of cryptocurrency. There are even some coffee shops and other shops where you can pay in bitcoin. These are few and far between though.
Most currencies are controlled by their respective governments who can control inflation levels and can engineer policies such as quantitive easing to ensure the currency remains stable.
You can also only use the official currency in each country. This means currencies are inherently political rather than being truly controlled by the free market. Bitcoin can also be used anywhere in the world or on the internet.
The issue with the fact that bitcoin is a global currency, not overseen by any one government, is that its users can avoid scrutiny. If a user is paid in bitcoin it is easier for them to avoid taxes.
Furthermore, bitcoin has also been the currency of choice for those buying and selling illegal drugs and other illegal activities that can be carried out via the dark web.
Many people would also argue that bitcoin is less secure than most currencies as it isn’t subject to the rules that means banks must compensate you if your account is hacked.
Bitcoin can be mined. The bitcoin runs from the blockchain, a complex computer program that ensures every transaction is noted and entered into the system.
Computer programmers who understand how to solve the complex mathematic programs that underpin the blockchain system are rewarded with bitcoins through a process called mining.
Mining requires a very sophisticated and powerful computer. The advanced computers needed to carry out these transactions are increasingly out of limits to the ordinary user and so mining is no longer a viable way of generating bitcoin for yourself.
The world of bitcoins, cryptocurrency and the blockchain is complex. But it has a world of possibilities and it has already started to change the world for the better. It is a global currency not backed by any bank or government.
The advantage of this means the currency is subject only to the market and not any political influence.
But bitcoin’s detractors would argue that this creates a lawless currency in which its users can avoid paying taxes and use the currency to purchase illegal drugs or even child pornography, without consequence or trace.
Bitcoin is volatile even though one bitcoin is worth thousands of dollars. This means that it is possible to make serious amounts of money through currency trading that is not possible with other traditional currencies. But the downside to this is that it is also possible to lose money.
If you are interested in learning more bitcoin facts then be sure to check out the rest of our site.